Form BEN-2: Return of Significant Beneficial Ownership

Who is a significant beneficial owner

A significant beneficial owner (SBO) is an individual who, acting alone or together with others or through a trust, holds indirectly, or together with direct holdings, at least one of the rights below. If an individual holds only directly, in their own name, they are not an SBO for this purpose, because their holding already appears in the register of members.

• 10% or more of the shares
• 10% or more of the voting rights
• Right to receive 10% or more of distributable dividend
• Right to exercise significant influence or control by other means

BEN-1, BEN-2, BEN-3 and BEN-4

The SBO declares their interest to the company in BEN-1 within 30 days of acquiring significant beneficial ownership or any change in it. The company then files BEN-2 within 30 days of receiving BEN-1 and records the SBO in a register in BEN-3, open to inspection by members.

Section 90(5) also places a duty on the company to identify SBOs. It sends notice in BEN-4 to any non-individual member holding 10% or more, seeking information about individuals behind it. If information is not provided, the company may apply to the Tribunal for restrictions on the shares.

Exemptions

Rule 8 exempts holdings by certain persons, for example the Investor Education and Protection Fund Authority, a holding reporting company whose own details are reported, the Central and State Governments, and SEBI-registered investment vehicles such as mutual funds, alternative investment funds, REITs and InvITs. Check the full rule before relying on an exemption.

Indian subsidiaries of foreign groups are among the most common filers, since the individual owners often sit several layers above the Indian company. Family-owned groups holding shares through investment companies or trusts are also frequently covered.

Fees and penalties

BEN-2 carries the standard nominal-capital fee of ₹200 to ₹600, and the usual additional fee multiples apply if it is filed after 30 days, starting at 2x the normal fee and rising to 12x beyond 180 days of delay.

Section 90(11) provides that if a company fails to maintain the register, file BEN-2, or take steps under Section 90(4A), it is liable to a penalty of ₹1 lakh plus ₹500 per day of continuing failure, up to ₹5 lakh. Each officer in default faces ₹25,000 plus ₹200 per day, up to ₹1 lakh. Separately, under Section 90(10), an SBO who fails to declare faces ₹50,000 plus ₹1,000 per day, up to ₹2 lakh.

Common mistakes

The SBO register in BEN-3 must be kept at the registered office and is open to inspection by members. Changes reported by the SBO in a fresh BEN-1, such as an increase or decrease in holding or a change of address, each require a fresh BEN-2 within 30 days.

Errors include treating direct shareholders as SBOs, missing indirect holdings through LLPs or trusts, not sending BEN-4 to corporate shareholders, and failing to refile when the group structure changes. Foreign parents sometimes delay providing BEN-1, which pushes the company into default, so request it early when shareholding changes. Refogo's partner professionals can map SBOs and file BEN-2 for a fixed fee.

Step by step

1. 1Map the ownership chain

   Trace holdings through companies, LLPs and trusts to individuals.

2. 2Send BEN-4

   Seek information from non-individual members holding 10% or more.

3. 3Receive BEN-1

   Collect the SBO's declaration.

4. 4Update BEN-3

   Record the SBO in the company's register.

5. 5File BEN-2

   Within 30 days of receiving BEN-1, sign with DSC and pay the fee.